In BP's most recent annual energy outlook report, company analysts estimated that demand for oil would continue to grow until at least the mid-2040s.
Watch this Industry Focus: Energy video segment to see Motley Fool analysts Sean O'Reilly and Taylor Muckerman explain how that could be -- where the demand is going to come from, and how it could possibly be met. Also, the hosts talk about where U.S. production of oil is expected to go, how BP (NYSE:BP) projects Africa's demand for energy to grow in the next few decades, and more.
A full transcript follows the video.
This podcast was recorded on Feb. 10, 2017.
Sean O'Reilly: OK, I'm going to spoil the whole oil demand thing -- they think that oil demand is going to continue to grow until the mid-2040s. One, that is extraordinarily surprising to me. Two, you're talking, based upon their charts, well over 100 million barrels per day that the world is going to want by then. I would think we would need Nigeria's oil to get there; that's what I'm saying.
Taylor Muckerman: Well, you see Brazil, the deepwater there is expected to finally come online.
O'Reilly: That's been a story for ...
Muckerman: Yeah, as long as I've been covering energy, Brazil is supposed to be producing deepwater oil.
O'Reilly: Somehow they'll lose all of it due to corruption charges.
Muckerman: But in relation to other offshore oil, it's not that expensive. So that could be a point that we turn to. Venezuela relies very heavily on offshore oil production. So it could just be too expensive for them.
O'Reilly: I was really surprised by that. You have the electric-car bulls and all that --
Muckerman: Yeah. Transportation takes a back seat to non-combustible demand sources. Basically, the petrochemical industry is going to take over the mantle of demand from transportation.
O'Reilly: And that, of course, just means that there's going to be 1.5 billion more people, we're going to get slightly richer, and everybody likes plastic stuff.
Muckerman: Not just plastic. Rubber, clothes. People probably don't realize how much oil they're wearing.
O'Reilly: Are you wearing oil right now?
Muckerman: I'm sure. I don't know what it is, but the soles of my shoes, probably. You have recyclable materials going into shoes now, but that's a small fraction of global apparel. And home goods and car parts, you name it.
O'Reilly: Yeah. I'm looking at their chart, it's Page 88 of the report, 2035, they think about 105 million barrels per day being demanded. What are we at -- 96? So that's not a crazy jump.
Muckerman: Yeah, I think I saw somewhere that the U.S. might jump up to about 15 million barrels per day of that, at some point. And then, the tail end of this, looks like our share kind of starts to decline.
O'Reilly: What did you think of that? I've also seen these reports that talk about how everybody's talking about the shale boom in the United States. And I saw that shale production in the U.S. might peak out at about 2020, and I was like, what's going on there?
Muckerman: Yeah. U.S. share in the first half of the outlook grows, but then it gradually declines. But if you look at natural gas from shale in the U.S., that's going to grow by double, probably, that's what they say.
O'Reilly: We have lots of gas.
Muckerman: Yeah. And then that feeds into the LNG discussion that we had at the top of the segment. We have the gas to liquefy, to export. Europe just so happens to be a very close trading partner with us, directly across the Atlantic Ocean. So far, the export facilities that we have online or soon to come online are in the Gulf Coast and the Eastern seaboard. So, easy access to Europe.
O'Reilly: Good to go. So the other cool thing that I thought was interesting was Africa is going to be half the increase in global population, but 10% of the GDP increase, the effect. And they actually said in their report that if they were to just meet what India has done in the last 10 years in terms of productivity and GDP growth per capita, it could get very interesting in Africa.
Muckerman: Yeah. I didn't end up getting to it, but in the 90s, page-wise, they talk about Africa beyond 2035. That's when the demand is really going to start to kick in, they think, for energy in Africa. A lot of people there don't have access to convenient or reliable energy sources yet.
O'Reilly: And I have to assume, given what's going on with solar today ...
Muckerman: Yeah. Small regional solar, utility-size plants, are going up in Africa, more so than in other parts of the world, I think, because you don't have the continentwide distribution networks, so you need these localized power supplies, and solar is able to provide that for a decent part that continent. It's not yet, but the solar availability for Africa is pretty high in comparison to northern Russia or Canada or anything like that.
O'Reilly: Right. The sun shines there.
Muckerman: Yes, it does.
O'Reilly: I stepped away from this kind of optimistic about the future.
Muckerman: Me, too. Look at dirty fossil fuels being replaced by cleaner fossil fuels or renewables. Look at renewable energy sources supposed to quadruple by 2035. So you're looking at renewables, nuclear, and hydro, 50% of the increase by 2035. As an overall share of energy production, oil and coal decline. Demand rises slightly for both. But renewables and natural gas catch up and take over some of the market share. They're still not going to be the leaders, but natural gas does surpass coal in the last few years of the projection. It's already surpassed coal here in the United States very recently, but globally, it's supposed to surpass coal in terms of energy market share in the latter half, maybe 2025 or 2030.